True to the title, this book provides timeless strategies for Successful Investing. In this 7th edition, Winning the Loser’s Game, Mr. Ellis provides truths for investors of all generations and levels of expertise. Everyone should consider, apply, and use these to better their approach to investing.
This post may contain affiliate links. See my disclosure policy here.
AN OVERVIEW OF WINNING THE LOSER’S GAME
Table of Contents
- 1 AN OVERVIEW OF WINNING THE LOSER’S GAME
- 2 PRACTICAL APPLICATION OF STRATEGIES FROM WINNING THE LOSER’S GAME
- 2.1 Don’t Try to Beat the Market: Index Instead
- 2.2 Winning the Loser’s Game with 10 Timeless Strategies
- 2.2.1 1. Establish and Follow your Investment Policy.
- 2.2.2 2. Focus on Indexing Efficient Markets.
- 2.2.3 3. Know Thyself!
- 2.2.4 4. Maximize the Use of Tax-advantaged Retirement Plans.
- 2.2.5 5. Mind the Presentation of a Fund’s Financial Data.
- 2.2.6 6. The Long Term Focus is the Only Focus.
- 2.2.7 7. Risk Awareness and Portfolio Constitution.
- 2.2.8 8. Keep the Whole Picture in Focus.
- 2.2.9 9. Carefully Weigh Conventional Wisdom.
- 2.2.10 10. Winning the Loser’s Game.
- 3 CLOSING THOUGHTS ON WINNING THE LOSER’S GAME
The concept of Winning the Loser’s is easy enough to understand, but challenging when it comes time to put it into play. Put simply, the investment frontier is different today because the industry is saturated with experts and highly trained professionals. Years ago, professionals could more easily beat the market. However, today that challenge is exponentially more difficult because of the sheer volume of intensely competitive experts.
As he explains in some excellent analogies, “Professionals win points; amateurs lose points.” The point being, a winner’s game is won by the “correct actions of the winner” — a “loser’s game is determined by mistakes of the loser.” To be successful, one of the strategies from this book that that common investors such as you and I should apply is to take advantage of the hard work and expertise of the professionals by Indexing instead of trying to beat the market with an active trading approach. “If you can’t be ‘em, might as well join ‘em!”
This book has some great points, and everyone can draw some pointers from it. Interested in getting your own copy? Order your very own copy of Charles D. Ellis’ book, today!
Resource Richness and Readability of Winning the Loser’s Game
There is a lot of good summary-level information provided by Mr. Ellis. His impressive resume and professional experience add credibility to the suggestions he makes. Mr. Ellis’ data read quite well; technical terms and concepts are made clear and concise.
What makes this good, in the summary form, is also what detracts in some ways. In my opinion, more specific details in some of the sections (e.g. chapters on building portfolios and selecting mutual funds) would have been made even better with real-life examples. For instance, when speaking about building portfolios, more examples of asset mixes would have been great. For the mutual fund selection, a few lists of specific indexing funds would have been icing on the cake.
Winning the Loser’s Game – Application & Adaptability
I view this book as a philosophical and conceptual presentation of the investment space. This helps readers cover a lot of material, and a lot of history, all in a manageable setting. I ended up with several solid, condensed pages of notes, and plan to tweak my personal approach to investing based on the knowledge shared by Mr. Ellis. Readers can quickly isolate and identify “weaknesses” in their proverbial armor and get some pointers on what to improve.
PRACTICAL APPLICATION OF STRATEGIES FROM WINNING THE LOSER’S GAME
There exists myriad actionable information mixed within the rich analogies and investing principles. Some of the consistent themes are Indexing (investing in the underlying index with a passive approach), focusing on the long-term, “knowing yourself” to determine personal investing requirements and biases, and having a solid plan in place.
Don’t Try to Beat the Market: Index Instead
This was a central theme, and worth emphasizing here. I completely agree with this approach, and I think it will serve many investors well. All would do well to employ what Mr. Ellis calls an “unfair advantage” of indexing. The sheer volume and expertise of professional investors make it a game of the highest levels of competition where any mistakes in market conditions are quickly exploited and corrected. This all happens at a rate that common investors cannot hope to keep up with. And with good reason. These professionals and their respective institutions making up the market can be ‘tapped’ for their help by investing in the index, which captures those opportunities. By focusing on the long-term, indexing, and employing goals that fit your needs, investors can be successful!
Winning the Loser’s Game with 10 Timeless Strategies
1. Establish and Follow your Investment Policy.
Make sure this is your Investment Policy, complete with risk tolerances, investment objectives, and timelines. Consider paying for Investment Counseling, “the most important investment service most investors will ever use.” Also, get out of debt, Save, and then Invest. Then, stick with it!
2. Focus on Indexing Efficient Markets.
Central to the theme of the entire book, leverage Index funds, and target efficient markets when doing so. This grants an advantage in not trying to beat the market via active management — if you can’t beat them, join them!
3. Know Thyself!
This ties into the efforts to establish a successful Investment Policy, but it also includes being aware of your personal financial biases, and risk tolerances.
4. Maximize the Use of Tax-advantaged Retirement Plans.
This is quite important! Taxes cut into returns, and failing to take full advantage of the tax-advantaged plans at your disposal could be costing you, especially in the long-run.
5. Mind the Presentation of a Fund’s Financial Data.
Many funds and financial products are made for selling to the investor, not helping the investor. Within that though, be aware of returns are presented on averages, or gross of fees, etc.
6. The Long Term Focus is the Only Focus.
Stay the course, and do not deviate from your Investment Policy. Build knowledge about the markets, and understand that ups and downs will occur — learn, so you can weather the storms when they come.
7. Risk Awareness and Portfolio Constitution.
Possibly all investors should seek moderately risky investments when constructing their portfolio. Indexing efficient markets are important, as is choosing a fund with low fees. Also, keep closely in mind that past results are no guarantee of future performance!
8. Keep the Whole Picture in Focus.
Plan for the future, and make plans accordingly. For example, invest in your education (both academic, and personal finances). Keep in mind your future earnings, your potential for bonuses, future home purchases, and the like. Take a positive mindset. It is never too late to start.
9. Carefully Weigh Conventional Wisdom.
It may not apply to you and today’s market is not what it has been previously. Do not blindly follow rules such as “invest your age as a percentage in bonds” probably doesn’t apply to today’s markets.
10. Winning the Loser’s Game.
This ties into many of the previous points, but I think it is worth mentioning again. To win the game, stop trying to “beat the market” and forget the short-term focus. Establish an investment policy that is unique and specific to your needs, and see it through. Consider paying for a professional to review your investment policy, and then have it updated every couple of years. Watch fees, and manage your risk exposure.
CLOSING THOUGHTS ON WINNING THE LOSER’S GAME
This was a good quick read, and it highlights several of the constant themes from other books I’ve read. Aside from the points, I’ve already outlined, there are even more practical points that readers can employ in their personal finances.
However, in my opinion, the book feels like a textbook at times and the jabs made towards those who don’t believe in evolution or global warming (yes, it was used to make some points… in an investment book) were out of place. That notwithstanding, there are excellent examples, goals to strive toward, and thought-provoking questionnaires designed to help readers succeed in this Loser’s game we’re all in.
I wish you the best of luck in your endeavors! Keep up the hard work, keep developing yourself, and keep cultivating Mêtis in your Money Matters. Diligently pursue excellence, my friends!